The report includes six business advantages of committing to sustainability, including attracting investors, being more competitive, faster growth and innovation, more brand recognition and loyalty, mitigating risk, and more efficiency. It also involves five trends related to sustainability. Additionally, it provides two case studies of automotive brands that champion sustainability, for BMW Group and General Motors. Furthermore, it provides insights into sustainability-oriented consumers. It also details how a purpose-driven organization contributes to a more sustainable society.
Business Advantages of Committing to Sustainability
- While six business benefits have been explained in detail below, the infographic presents multiple advantages based on the review of 30 years of research on Corporate Social Responsibility.
1. Attracting Investors and Improving Valuation
- Investors, like customers, desire to be a part of something greater than themselves. While logic is an important part of their decision process, it is equally important to appeal to their hearts, which may make a difference. It is especially true for higher-risk investments.
- Still, investing in businesses that have strong sustainability practices is usually data-driven. Therefore, investors don’t make decisions based on sustainability claims but on how well the company meets its sustainability metrics and how they impact their business value.
- According to Goby, sustainability is the fundamental driver of investment value, with sustainable investments growing 1,000% between 2004 and 2018.
- According to Harvard Business School, 73% of investors claim that an organization’s efforts to positively impact the environment or the society influence their decisions.
- Furthermore, among millennial investors, 41% take time to understand a company’s CSR practices, compared to 27% of Gen X and 16% of baby boomers.
- According to Deloitte research, 58 percent of 1,000 company studies released between 2015 and 2020 found a favorable correlation between ESG and financial success.
2. Increased Competitiveness
- Forbes and BCG both believe that sustainability can be a massive competitive advantage and a differentiator, but it needs to be embedded deeply in business strategy.
- According to Forbes, five steps to transform sustainability practices into competitive advantage are reviewing Social Development Goals aligned with the business model, finding practical and actionable ways to implement them, considering partnerships to increase impact, measuring and monitoring, and creating communities for scalability.
- Additionally, investing in sustainability can raise market standards, which may create barriers for potential competitors with irresponsible practices.
- Research among micro-, small-, and medium-sized businesses in Peru shows that implementing well-designed sustainability strategies, such as improvements in waste management or energy consumption, can result in a competitive advantage and make a difference in surviving the COVID-19-related crisis.
- 60% of companies believe that having a sustainability strategy is crucial to remaining competitive.
3. Faster Growth and Innovation
- Sustainability practices support innovation and growth through improving workplace culture and helping businesses to find novel ways to meet consumers’ growing expectations.
- Another reason why a social or environmental purpose fosters innovation is by promoting collaboration to fulfill a mutual mission.
- Additionally, improving operational efficiency and investing in a sustainable supply chain can have a positive effect on innovation quality, thus fostering growth.
- Sustainability is the mother of all disruption, according to Ioannis Ioannou, Associate Professor of Strategy and Entrepreneurship at London Business School.
- 79% of business leaders believe that purpose is central to their success, in part because it allows the organization to evolve and transform, instead of just achieving linear growth.
- 37% of businesses say that sustainability fuels their research and development, while 33% claim it inspires their product development.
- Sustainability-related CPG products grew 7.1x faster than the market between 2015 and 2019.
- 53% of Chief Experience Officers surveyed by Deloitte generated positive revenue streams from socially-conscious offerings.
- Deloitte also found that overall, purpose-led companies are 30% more innovative.
4. Brand Recognition, Reputation, and Loyalty
- With consumers increasingly demanding that brands should take a stance on social and environmental issues, sustainability is an important factor in their loyalty. While product quality plays a crucial role in inspiring repeated purchases from a brand, it is closely followed by sustainable and ethical practices, as well as brand mission. It is especially true for young consumers.
- Sustainability can improve brand recognition both for B2C and B2B brands. For example, a manufacturing brand can find more partners through clean energy investments.
- According to Deloitte, 78% of customers are more likely to recall brands that are purpose-driven.
- At the same, 72% are likely to forgive a brand for a mistake if it has a strong sustainability stance, while 70% would defend it.
- Corporate responsibility accounts for 41% of a company’s reputation.
5. Mitigating Risk
- By committing to sustainability, companies can anticipate stricter regulations related to environmental and social responsibility, which may reduce operational risks or even open a dialogue with public decision-makers.
- Initiatives such as sustainable supply chains and investing in renewable energy significantly decrease the exposure to environmental risks for several industries, including manufacturing, food, agriculture, and power generation.
- It is even more true for brands that have a strong purpose. According to McKinsey, such businesses recover faster from a crisis due to being able to respond to it in a value-driven, authentic way, which keeps the stakeholders engaged. Furthermore, being purpose-led increases the awareness of policy changes, industry standards, and changing external expectations.
- An established Corporate Social Responsibility Strategy has been associated with a lower risk of being sued.
- If businesses were to account for the environmental harm they produced, 15% would become unprofitable.
- According to a Deloitte survey, 88 percent of consumers would abandon a brand due to its unethical business practices. At the same time, 30% of a company’s value can be diminished to consumer or regulatory pushback.
- By 2026, environmental risk in supply chains will cost companies up to $120 billion.
- Initiatives related to environmental issues can reduce costs by decreasing the use of resources, for example, by working toward better energy or water efficiency.
- For example, investing in sustainable and shorter supply chains can improve their efficiency. Unilever has recently saved $1.5 billion by partnering with sustainable suppliers.
- Sustainability can also decrease other costs, including the cost of capital and the cost of labor.
- 64% of companies with product sustainability programs have lower supply chain and logistics costs.
- A 20% reuse of plastic packaging translates into a value of $10 billion.
- With a 10% increase in employees’ connection to the company’s purpose, it can see a 12.7% reduction in workplace incidents and an 8.1% reduction in turnover.
Trends around Sustainability, The Circular Economy, and Purpose-Driven Organizations
1. A Shift from “Why” to “How”
- Multiple sources, including McKinsey, Fast Company, Deloitte, and Sustainable Brands, emphasize that while “company purpose” is a buzzword, the emphasis needs to move from whether being purpose-led is important to how to do it convincingly and benefit from it. The trend was included due to the number of mentions by industry experts.
- According to McKinsey, the awareness around the importance of company purpose is high, with 82% of their survey participants stating that having a purpose is important, but only 42% feeling like it had any substantial impact.
- Across many organizations, purpose statements and commitments are generic, disconnected for stakeholders’ needs, and not followed up by tangible action.
- Several recommended solutions to get the purpose right are finding a purpose that is emotional and personal, engaging all stakeholders in designing the purpose at the early stage, finding a purpose that is connected to the company’s unique value, and find ways to keep the purpose at the top of each employee’s mind every day.
- An example of a company that found a personal and emotional purpose that remains to be at the core of its business is Starbucks. It is worth noting that founder-led businesses tend to find it easier to connect to a personal purpose, though others should work toward it as well. It aims to create a culture of warmth and belonging, challenging the status quo, and acting with courage and transparency.
- Another example is H&M. It used its primary company value and opened its supply chain to other brands, so they could make progress in their sustainability efforts.
2. Increased Transparency
- The trend was included due to being mentioned in several articles, including Investopedia, World Favor, and Forbes.
- Transparency has become a requirement for a company that aims to be seen as sustainable. While it has always been a value, its meaning has increased in the era of fake news, alternative facts, and social media making lies go viral. As a result, without transparency, also on sustainability efforts and environmental impact, stakeholders are unlikely to trust a brand.
- At the same time, consumers got used to being able to access almost all information instantly, which is why they demand insights on matters that used to be kept behind the scenes.
- Stricter regulations are an additional growth driver for this trend. For example, European companies are already pushed to share their climate risk. It is predicted that the same will soon be demanded from US businesses.
- As a result of rising demands and regulations, companies are increasing their reporting on environmental and social impact.
- Another predicted impact of this trend is that companies will soon make their sustainability reporting more accurate, due to rising pressures from investors, who claim that the data is not reliable enough to base investment decisions upon it.
- One company at the forefront is Audi. In 2020, it combined its annual and sustainability reports in the spirit of transparency and to demonstrate that the issue is its top priority.
- An additional example is Procter & Gamble. There was a divide among its shareholders about whether to let Charmin publish a report on its efforts to decrease deforestation. They eventually voted in favor.
3. More Emphasis on Sustainable Development Goals (SDGs)
- The trend was included, because it was mentioned by Forbes, United Nations Global Compact, as well as described in research papers.
- In 2012, the United Nations adopted the Sustainable Development Goals. They are 17 metrics designed to create a more sustainable future. They have been adopted by 193 countries.
- According to Forbes, in 2021, companies are likely to increase their efforts to make progress on SDGs, because it has been slower than expected. At the same time, since many issues were emphasized due to the pandemic, businesses have more incentive to tackle them.
- It is likely that CSR and ESG initiatives will be planned around Sustainable Development Goals, with public-private partnerships formed to improve progress on them.
- So far, 19% of companies in Asia are aligned to the goals they committed to, compared to 17% of companies in Europe and 8% in the US.
- The chart below shows that most companies are aligned on “decent work and economic growth,” while the largest number is misaligned on “responsible consumption and production.”
- Two companies at the forefront are Salesforce that recently launched a workforce training initiative to meet SDG8 and Burger King that launched the #BKMeltdown campaign to work with suppliers on reducing carbon footprint and plastic use as a response to one of the goals.
4. Stricter Policies on Circular Economy
- The trend was included because it was mentioned by GreenBiz and RegScan.
- Multiple countries have either established policies or expressed the intention to do so in order to participate more in the circular economy.
- According to RegScan, several countries that have introduced circular economy-related policies are Belgium, Netherlands, and Luxembourg.
- Similarly, according to GreenBiz, one of the main circular economy trends in the US is for policymakers to hold producers responsible for waste. Nine states have introduced extended producer responsibility bills. Despite them, US is still behind in producer responsibility compared to Europe and Canada.
- There is also increased activity among advocacy groups that calls for such policies. One example is The Recycling Partnership. Its initiative, the Circular Accelerator, focuses specifically on them.
- GreenBiz notes that the key question is whether companies will work with policymakers on creating the policies, or against them.
- A company that is working toward a circular economy is IKEA. It has formed a partnership with the Ellen MacArthur Foundation to transition to a circular economy by 2030.
- As of now, around 9.1% of the economy is circular, which causes a circularity gap.
5. Hearing Diverse Voices
- The trend was selected, as it was chosen by Forbes, GreenBiz, and Yahoo.
- According to Forbes, many companies increased their investment and upped their stance on racial equality in response to racial justice issues such as the killings of African-American individuals.
- The racial justice-related issues have urged (and will urge) companies to hire more employees from racial and ethnic minorities, improve pay equity, and partner with more women-owned businesses.
- 69% of executives believe that diversity is a key issue, which was discovered in an outdated survey by Deloitte, cited by more recent sources, which makes it relevant.
- An example of a company at the forefront is Sephora that pledged to dedicate 15% of its shelf-space to Black-owned brands and is making efforts to achieve it.
1. General Motors
- General Motors is an automotive corporation headquartered in Detroit, Michigan, US. It makes automobiles, trucks, engines, and automotive companies.
- Some of its main brands are Chevrolet, Cadillac, and Buick.
Sustainability Practices and Goals
- The firm has a Sustainability Office, led by the Chief Sustainability Officer. The team’s main tasks are cross-functional collaboration for responsible material consumption and production, leading strategic design and implementation of the EV infrastructure, and engaging internal and external stakeholders in the work toward a zero-emissions future.
- The office is a “team of teams,” which ensures that various business areas across the company are aligned with the company’s vision.
- The office works in close partnership with investor relations, finance, human resources, manufacturing, and marketing.
- GM’s sustainability initiatives are centered around the following areas: reducing carbon emissions, supporting supplier responsibility, keeping people safe, developing talented people, earning customers for life, fostering diversity and inclusion, designing for the environment, and sustaining communities.
- Some of the specific goals include achieving carbon neutrality in global operations and products by 2040, sourcing 100% energy from renewable sources by 2035, using at least 50% sustainable materials in vehicles by 2030, and enrolling 100% of “targeted tier-1 suppliers” in Supplier Sustainability Program.
- An example of a recent initiative is creating a $60 billion “Equitable Climate Action” plan, which encompasses an existing $35 billion investment in electric vehicles and a new $25 billion philanthropic fund.
Company’s Purpose in the Context of Sustainability
- The company describes itself as more purpose-driven than ever before.
- Its slogan is “We stand together to drive the world forward. Everybody in.” Simultaneously, its aim is to contribute to the creation of a world free of crashes, pollution, and congestion.
- The “About Us” page on the website also lists behaviors that are embedded in the company. Some of them are:
- “Innovate Now – Bringing urgency to achieving our vision everyday;”
- “It’s On Me – Taking personal responsibility for your work and contributions to our culture;”
- Winning With Integrity – Doing the right thing, even when it’s difficult.”
- Additionally, Forbes notes that General Motors has made significant investments in brand purpose advertising.
- In 2020, Eupedia published a list of the most sustainable automakers, based on the average score from four of the most reputable sustainability rankings, which are S&P Global ESG, Carbon Disclosure Project, Newsweek’s Green Rankings, and CSRHub. General Motors ranked seventh with a score of 73.93, which makes it the most sustainable US automaker.
- The company received multiple awards related to its sustainability practices, including four inclusions among America’s Most Just Companies, two inclusions on Ethisphere’s World’s Most Ethical Companies, SEAL Business Sustainability Award, and 2020 Business Intelligence Leader in Sustainability.
- While the source is slightly outdated (from March 2020), an interview with David Tulauskas, Director of Sustainability at GM, provides insights into how the company drives business value with sustainability. According to him, because consumers expect responsible operations, keeping sustainability-related pledges adds significant operational value in terms of producing bottom-line savings that correspond with the long-term company plan and keeping promises to stakeholders.
- Furthermore, energy efficiency generates cost savings and mitigates risks related to energy cost volatility.
- In terms of business value, GM’s brand purpose advertising during the last Superbowl “increased purchase propensity by 153%.”
- So far, the company’s progress includes a 22% reduction in absolute energy use, 11% reduction in energy intensity, 13% reduction in water intensity, and 29% reduction in emissions intensity.
2. BMW Group
Sustainability Practices and Goals
- The company’s sustainability goals include measuring Board of Management and executive management by sustainability targets, setting science-based targets, fulfilling CO2 reduction targets until 2030, achieving the most sustainable supply chain globally, implementing circular economy for resource management, linking premium products to sustainability, and implementing ambitious product strategy that involves reducing CO2 emissions with seven million electrified vehicles.
- For the first time in BMW’s history, the CO2 reduction targets encompass the entire lifecycle, with the planned decrease of at least one-third per vehicle across the whole spectrum.
- As for the circular economy, the company has ambitious goals for increasing the use of secondary materials in its vehicles, particularly because they can significantly reduce CO2 emissions for aluminum, cobalt, nickel, and lithium. It also partnered with Duesenfeld, German recycling specialist, to increase the recycling rate of high-voltage batteries to 96% (even though the rate required by the German government is 50%).
- Starting in 2020, the company has changed its reporting policy. It will publish an integrated report with financial figures, general business development, and progress on sustainability goals. It is supposed to ensure transparency and emphasize that sustainability is at the core of BMW’s strategy.
- BMW Group has executives responsible for different elements of its sustainability strategy, including CO2 reduction, environmental protection in production, and sustainability in the supply chain.
Company’s Purpose in the Context of Sustainability
- The company describes sustainability as “the guiding principle for all its actions” and “the basis for economic success.”
- It understands sustainability as ecological and social responsibility, comprehensive product responsibility, and commitment to preserving natural resources. All those elements are embedded in BMW’s strategy.
- The company portrays itself as a trendsetter in sustainable mobility. Also, one of the primary metrics it reports is the number of electrified vehicles.
- The BMW Group’s strategy is comprised of four components: position (what do we stand for? ), direction (what motivates us? ), a strategic approach (where do we want to go? ), and collaboration (how do we accomplish our objectives?).
- Its position is centered around sustainability, with the following statement: “We stand for first class individual mobility and contribute to the sustainable development of our planet. We reconcile economy, ecology, and society. As a result, our customers enjoy outstanding products and demonstrate responsibility.”
- Similarly, the company’s direction involves combining high profitability, innovations, and passion to move toward sustainable mobility.
- Additionally, the corporate website’s “Responsibility” section is extensive, including stakeholder involvement, business reporting, product responsibility, group-wide environmental protection, supply chain management, employee participation, corporate responsibility, and the One Young World program. It demonstrates the company’s focus on the issue.
- The company’s stated priority is to become the most sustainable premium car manufacturer by establishing more elaborate solutions for sustainability.
- According to BMW AG Chairman of the Board of Management Oliver Zipse, “I am certain that the battle against climate change and our resource management practices will determine the future of our society – and the BMW Group. That is why we are taking immediate responsibility and elevating these concerns to the forefront of our future strategic orientation. This new strategic orientation will be embedded across the organization, from administration and buying through development and manufacturing, and finally, sales. We are elevating sustainability to new heights.”
- BMW Group ranked second in Eupedia’s ranking of the most sustainable car brands.
- In 2020, the Dow Jones Sustainability Indices World and Europe rated it the most sustainable automobile brand.
- Starting in 2020, all BMW Group plants have been using 100% renewable energy.
- The company has reduced CO2 emissions of its automobiles in Europe by 53% between 1995 and 2020.
- Additionally, in 2020, the company sold 192,662 electric automobiles.
Insights on Sustainability-Oriented Consumers
Types of Consumers Who Care About Sustainability
- According to the Sustainability Perception Index 2020 report, while over 50% of consumers are willing to pay more for products from sustainable brands, awareness around sustainability differs.
- The report identifies four major consumer segments in relation to sustainability, which are enthusiastic experts (24%), inspired innovators (27%), considerate conventionalists (13%), and reserved rationalists (36%).
- Enthusiastic experts have a deep conviction about the importance of sustainability and think that brands should be held accountable for not being environmentally friendly. They are outspoken about sustainability issues and have knowledge on them. While they are rather proactive in searching for sustainable brands, their awareness about which brands are sustainable is limited.They are prepared to pay a premium for environmentally friendly items and will avoid those that are not.
- To convince them, brands need to go beyond superficial messaging and light initiatives.
- Inspired innovators are those who are the first to try new things, trends, and technologies. Their latest interest is sustainability. They are the most proactive in searching for sustainable brands and have the most extensive knowledge about what to do. Most of them are willing to pay more for sustainable products and boycott ones that aren’t, though they don’t support premium tax for brands that are not environmentally friendly. They are quite knowledgeable about sustainability and moderately outspoken about it.
- To engage them, brands should use thought-provoking messaging, innovative thinking, and interesting products.
- Considerate conventionalists are mostly older individuals compared to the other two groups. Their attitude toward sustainability mimics the mainstream. While they believe it is important for products to be environmentally sustainable, they are only somewhat willing to pay more for them and aren’t likely to refuse to buy from brands that aren’t. They aren’t very knowledgeable about sustainability, though they have some awareness about which brands are sustainable.
- The keyword for attracting them is “inform.” They find knowledge empowering, which is why it is important to show them how the product is sustainable and why it matters.
- Reserved rationalists are the most reserved when it comes to sustainability. While sustainability matters to them for making a purchase decision, they don’t want to pay more for it. Their awareness about which brands are sustainable is low and they are not searching for them. They tend to be 40+ males.
- Brands should attempt to attract this segment by “nudging” them with value-driven initiatives. The benefits of sustainability are not enough to convince them, they need to be convinced that they are not being sold a fake.
- More information about each group is available in this report.
Consumer Behaviors Related to Supporting Purpose-Driven Brands
- Above 74% of consumers have taken action if they believed the brand was purpose-led. The percentage rises to above 90% for Asian countries.
- According to a Zeno Star study, the most desired behaviors of sustainable, purpose-led brands are:
- Products or services that match today’s consumer demands.
- Business practices that are ethical and sustainable.
- Contributions to significant social causes.
- New job opportunities.
- Diverse and welcoming culture
- Issue advocacy.
- Strong set of values.
Environmental vs Social Issues
- Sustainability encompasses both social and environmental issues. According to the Sustainability Perception Index 2020, environmental issues are more important for immediate purchase decisions, while social issues have more impact on brand reputation.
- Specifically, people check for environmental claims on products, with 52% of them willing to buy a particular product because it is more environmentally sustainable than their other choice. However, if claims are too vague (like H&M’s or Zara’s), they are unlikely to convince consumers.
- At the same time, 42% are willing to buy one product over another because it is socially responsible. However, a brand can experience long-term damage with consumers after a scandal related to social issues, as Boohoo did after its modern slavery scandal.
- The ten most important sustainability issues, including social and environmental, are: made without child or slave labor, the company is animal cruelty-free, made without harmful chemicals, fair trade, recyclable packaging, and made from 100% recycled materials.
- Among UK consumers specifically, top sustainability issues are waste reduction (44%), producing sustainable packaging and adopting circular practices (43%), reducing carbon footprint (43%), committing to ethical working practices (41%), and the practice and respect of human rights (39%).
- It is worth noting that consumers from countries that are already affected by environmental issues are the most likely to care about specific environmental causes. These countries include China, Brazil, India, and Australia.
Finding the Middle Ground Between Convenience and Sustainability
- MarketingWeek believes that while sustainability is important to consumers, marketers tend to overestimate its importance. If it has too much of an impact on price and convenience, even those who declare their interest in sustainability are unlikely to make a purchase.
- A global survey of 10,000 consumers by Getty Images found that 48% of them are aware that they should change their purchasing habits to be more environmentally friendly, but they don’t do it out of convenience.
- While consumers who consider themselves to be passionate about environmental sustainability are willing to pay more for sustainable products, the increase shouldn’t exceed 15%.
- According to MarketingWeek, typical consumers who care about sustainability should not be forced to pick between convenience and sustainability. If they are, they will very certainly choose the former.
- A report by IBM also makes the case for finding the middle ground between convenience and sustainability, though from a different perspective. The study shows that most consumers fall into one of the two groups: value-driven consumers (41%) and purpose-driven consumers (40%).
- It found that value-driven consumers mostly care about convenience and brand trust, though sustainability is still somewhat important. Meanwhile, purpose-driven consumers primarily focus on sustainability and brand trust. Therefore, finding the balance between convenience and sustainability could help appeal to both groups.
Emotions that Drive Sustainable Purchases
- Positive emotions are the most likely to influence purchase decisions. However, marketing of sustainable products often doesn’t take it into account, focusing on upsetting warnings.
- According to Harvard Business Review, hope and pride are two emotions that are the most effective for driving sustainable behaviors.
- An example of effective marketing based on hope is a campaign to eliminate one million plastic straws by Bacardi and Lonely Whale. It was accompanied with the hashtag “#thefuturedoesntsuck” and called for consumer action.
- As for pride, a study discovered that people who were openly praised for their energy-saving efforts saved more than those who got small financial rewards.
- Guilt can also be effective, though it has to be used subtly. An experiment among consumers who were urged to buy fair trade options showed that when “accountability was subtly highlighted,” participants reported expecting guilt if they didn’t choose green options and 84% of them chose fair trade products. However, if guilt was explicitly mentioned, most participants became angry or irritable, with only 40% choosing fair trade.
How a Purpose-Driven Organization Contributes to Building a More Sustainable Society
1. A More Complete Contribution Compared to a CSR Strategy
- While other sustainability and social impact practices can be disconnected from the company’s day-to-day operations and long-term strategy, a company’s purpose puts those issues at the center. It defines how the organization wants to relate to people it has relationships with and what problems it wants to solve. Deloitte calls it the company’s “soul and identity.”
- Purpose-led companies approach sustainability, social issues, diversity and inclusion, responsible sourcing, and sustainable supply chains in a mature way. Their uniqueness is centered around prioritizing human values at every level of their business.
- Some typical strategies that purpose-driven brands combine to make a social and environmental impact include basing business decisions on strong core values, donating products and services, donating money to nonprofits, supporting community projects with talent and resources, influencing industry-wide best practices, investing in R&D projects that solve social and environmental issues, and supporting employee volunteering.
- According to Kantar, businesses it includes among its Brandz Growth Brands fit into the trend of leading with a purpose. 51% of them actively support society, while only 34% of all companies plan to do that.
- Also, 48% of them support local communities financially and non-financially, while 29% of all brands do that.
2. Example of a Purpose-Led Brand’s Impact on Sustainability
- Unilever is an example of a major company that is purpose-led. For the last ten years, it has been committed to the Unilever Sustainable Living Plan, which has helped it become the most desirable consumer goods employer in 50 countries. Furthermore, its sustainable brands grow significantly faster compared to others.
- Its commitment and purpose are considered truly impactful, because they are authentic, embedded in the business, and strategic.
- Between 2010 and 2020, the company introduced numerous sustainability-related initiatives in several areas, including health and hygiene, nutrition, greenhouse gases, water, waste, sustainable sourcing, fairness in the workplace, initiatives for women, and inclusive business. Together, their practices helped them make progress on 15 different UN Social Development Goals.
- The company helped 1.3 billion people improve their health and hygiene, positively impacted the lives of 1.63 million women, worked with 832k smallholder farmers, and 1.83 small-scale retailers.
- It also reduced its environmental impact by half and sustainably sourced 67% of its materials.
3. Example of Purpose-Led Brand’s Impact on Circular Economy
- Patagonia is regarded as a best-in-class example of a purpose-led brand. According to Forbes, while it was always mindful about the environmental impact, throughout the years, it has only become more prominent in the environmental activism space. Its current stated purpose, backed by multiple initiatives, is “Patagonia is in business to save our home planet.”
- The company is transparent about its journey to becoming circular, openly sharing both failures and successes. While it states that it is better equipped to succeed compared to other clothing brands, it admits that the industry doesn’t have a system in place to become fully circular.
- Around 90% of the company’s clothes are recycled, organic, and traceable.
- It realizes that its growth throughout the years made it easier to experiment with sustainable practices, but at the same time harder to achieve circularity at scale.
- While it can become fully circular in terms of materials, the carbon footprint of transportation and producing diverse lines of products works against the purpose. Therefore, the company aims to focus on a more sustainable and circular business model by having a relatively small range of products, made using recycled materials, instead of virgin ones.
- Patagonia’s huge contribution to the circular economy is providing high-quality products that are supposed to serve consumers for many years, which is against the traditional business strategy of other clothing brands. In 2013, it launched a campaign “If It’s Broke, Fix It,” encouraging customers to take care of their clothes and repair them.
- It also promotes trading used clothes and being responsible shoppers. One of their ads even advised customers not to buy their jacket.
- In 2017, the World Economic Forum presented the firm with the Circular Economy Multinational Award.
4. Relationship Between Being Purpose-Led and Sustainability
- According to a 2021 research paper, the relationship between purpose-led brands and business sustainability has not been well-researched, despite the obvious connection.
- The only source we found that provides quantitative insights into the topic is a 2017 survey by EY and Sustainable Brands. While it’s outdated, we decided to still provide it, since it provides the relationship between the company’s purpose and different aspects of sustainability, as perceived by companies.
- According to the survey, most of the organizations that have a defined purpose and are at different stages of activating it, have a sustainability function that works closely with other functions to drive value.”
- Furthermore, the study analyzes the relationship between a defined organizational purpose and United Nations’ Social Development Goals (SDGs). SDGs are 17 goals for organizations to achieve by 2030, which aim to address the most critical issues for society and the planet.
- It showed that two-thirds of medium- and large-sized companies with a defined purpose are working on SDGs, with the majority measuring themselves against between four and seven.
- The most common reason for purpose-led companies to take interest in SDGs is “to understand global challenges” (named by 35% of those who use them).
5. Purpose During Crisis
- A survey by KPMG showed that CEOs of purpose-led insurance companies were not only better equipped to make business decisions during the pandemic, but also to support their communities, thus making a more significant impact on society.
- 82% of insurance CEOs said that their purpose helped them address their stakeholders’ needs during the pandemic.
- Also, 61% of them said they continually use their company’s purpose to drive action that addresses the needs of their stakeholders.
- Examples of pandemic-related initiatives by purpose-led insurance companies include providing a proprietary digital health platform to health authorities, handing premiums back to policyholders by auto insurers, and improving diversity and inclusion policies.
- Fast Company notes that purpose-driven companies had a significant impact on society during the pandemic, with over two-thirds of philanthropic donations coming from the corporate sector.